Parties Each Claim Entitlement to Down Payment of Home Following Separation

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When a couple’s relationship begins to get serious, they may consider purchasing a home together. Anyone who has paid attention to Canada’s housing market in recent years likely knows that the cost of homeownership has been steadily climbing in most Canadian provinces for the last few years. In some situations, one party in a relationship might have more financial means available to contribute to the down payment or purchase of a home. At the time a couple purchases a house, they may be thinking about what would happen if they were to separate or divorce, specifically as it relates to a significant down payment made by one party. Generally, a monetary contribution towards property creates what is known as a presumption of a resulting trust, meaning that the person who contributed the money did not intend it to be a gift to the other person. A recent decision, MacIntyre v. Winter, from the Ontario Court of Appeal looks at the Supreme Court of Canada’s position on this topic as well as how courts might apply the principle.

One Party in a Relationship Provides Down Payment for Home

The parties involved were a same-sex couple who entered into a relationship in 1994. They did not marry, nor did they have any children while they were together. The relationship lasted for just over 20 years. Five years after the relationship started, the parties (“RM” and “AW”) decided to purchase a home as joint tenants. The down payment for the home was provided by AW, whose mother gave him $100,000 towards the purchase. After the house was purchased, RM was responsible for mortgage payments, while AW was responsible for all other expenses associated with the home.

The parties lived in their initial home for six years, deciding to move to a larger home in December 2005. The new home was financed by the sale of their first home as well as a mortgage and additional monies provided by AW.

The Parties Decide to Sell Home

In an unfortunate turn of events, the couple experienced harassment from their new neighbours because of their sexuality. The harassment was serious enough to eventually involve police and resulted in damage to the parties’ mental health. Nevertheless, they stayed in the home until 2017, at which time they separated.

The parties decided to sell the home, a step in property division that many couples take upon separation. The home was appraised at $1,400,000. Upon the sale of the property, AW requested that he receive $480,248.82 back before the proceeds from the home were divided between him and RM. This amount reflected the down payments he provided for each home. He told the trial judge that he always intended that these monies would be returned to him in the event of a separation, while RM took the position that the monies were a gift and were subject to division between him and AW.

Determining Whether Down Payments were Gifts

During the original trial, the judge ordered an equal division of the proceeds of the sale of the home. The decision stated that AW had not demonstrated an intention that he was to be repaid the money he contributed to the home purchases. AW appealed this decision, stating amongst other things, that the trial judge erred in this finding.

On appeal, the court referend a Supreme Court of Canada decision from 2007, Pecore v. Pecore, that serves on the leading decision on the subject of gifting in these situations. In that decision, the court found that the presumptions of a resulting trust “provide a guide for courts in resolving disputes over transfers where evidence as to the transferor’s intent in making the transfer is unavailable or unpersuasive”.

The Transferee Must Demonstrate a Gift was Intended

The decision went on to state that when a transfer (in this case, the down payments) is challenged, the presumption requires the transferee to demonstrate that a gift was intended. In applying that approach to the case at hand, RM should have had the burden of establishing that the down payments were intended to be gifts, rather than AW.

The court looked at the trial judge’s decision. While the trial judge referenced the Supreme Court’s decision, even stating that RM had the burden to prove that AW had intended to gift him the money, it did not appear that RM was asked to complete this step. Instead, the court found the trial judge to have taken on a lengthy consideration of credibility issues. This led to a favouring of RM’s version of events and rejecting AW’s recollection of an express discussion about his intention.

Both Parties Listed as Joint Tenants

While the home was purchased with the parties listed as joint tenants, the court found that the evidence supported this to be an intention that should one of the parties die, the other would have been granted the home. This does not mean, however, that AW intended the down payment to be a gift.

The court found fault in the trial judge’s failure to properly engage with the principles established by the Supreme Court of Canada. Specifically, the court found that RM was not asked to satisfy three conditions needed to meet his burden. They are:

  1. An intention to make a gift on the part of the donor, without consideration or expectation of remuneration.
  2. An acceptance of the gift by the donee.
  3. A sufficient act of delivery or transfer of the property to complete the transaction.

As a result of RM’s failure to meet his burden of proof as well as the trial judge’s approach to resolving the matter, the court ordered that AW be returned the full amount of deposits and down payments he made towards the purchase of each home.

How Johnson Barristers & Solicitors Can Assist with Cohabitation Agreements and Division of Property

The parties involved in this dispute may have been able to avoid litigation if they had a cohabitation agreement in place, outlining what would happen with their property in the event of their separation. The family law team at Howie Johnson Barristers & Solicitors in Windsor assists clients in a full range of family law issues, including those related to the division of property. Contact us online or by phone at 519-973-1500 to see how we can help you today.

 

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